Larry Summers Warns China on Dangerous Stock Market

Comparing the Greece debt drama and the recent meltdown in the Chinese stock market, the situation in China represents a “greater source of financial risk to the world,” former Clinton Treasury Secretary Larry Summers said Monday.

“I thought the strategy of manipulating the market upwards that the Chinese were pursuing was quite a dangerous one,” said Summers, who also was an economic advisor to President Barack Obama.

The short-term goal to halt the market slide may have been achieved, but in the long term such intervention often proves troublesome to manage, he told CNBC.

“The historical experience is that it’s very, very difficult in markets which people are able to speculate,” Summers said on “Squawk Box.”

Chinese stocks added another 2.4 percent overnight, after recovering 6 percent last week on the back of Beijing’s recent market boosting measures, which included suspending initial public offerings and relaxing margin lending and collateral rules. The Shanghai Composite has fallen about 23 percent since hitting seven-year highs in mid-June. But over the past 12 months, the market has nearly doubled.

via CNBC

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza